HALA Compromise Would Bring Back Owner-Occupancy Requirement for Backyard Cottages

City council member Mike O’Brien is proposing, and the city’s Office of Community Planning and Development is drafting, a change to the Housing Affordability and Livability Agenda Plan designed to assuage some homeowners’ complaints that allowing more backyard cottages and mother-in-law apartments will lead to a building boom by speculators hoping to cash in on the new, less-restrictive rules. OCPD confirms it is working on the proposal for O’Brien as a response to community input at meetings on HALA over the past few months.

Currently, anyone who wants to build a backyard apartment or a mother-in-law apartment inside their house (known as detached accessory dwelling units, or DADUs, and attached accessory dwelling units, or ADUs, respectively) must live on the premises, either in the new unit itself or in the main house on the property. One of the proposals in the original draft of HALA called for loosening that requirement to encourage more homeowners to build secondary apartments, as a way of enabling less-wealthy folks to live in the city and to very slightly nudge density in the two-thirds of the city zoned for exclusive single-family use.

Some neighbors objected to the proposed rule change, suggesting that it would lead speculative developers to descend on single-family neighborhoods, buy up houses, build backyard cottages, and then rent out both the main house and the secondary apartment. Some also said that rental properties tend to fall into disrepair, suggesting that renters are worse neighbors than homeowners are.

Under the new compromise proposal, property owners would be required to live on their property for at least a year after building a backyard cottage or mother-in-law, on the theory that no speculator would bother buying up single-family houses to build and profit from secondary apartments if they had to live there. The proposal is also based on the assumption that if a homeowner has to live next to a new backyard cottage for at least a year, they’ll be less likely to build something that looms over their neighbors, or that doesn’t fit the “character” of a neighborhood.

O’Brien acknowledges that his compromise is, to some extent, a solution searching for a problem. “No developers are building backyard cottages that I’m aware of,” O’Brien says. “I haven’t looked at any financial analysis, but it’s hard for me to imagine that the math would work for someone to come in and buy single-family homes and build backyard cottages.” Most development in what people consider single-family areas occurs in multi-family zones that have been historically underutilized; developers buy up houses, raze them, and replace them with small apartment buildings.

Backyard cottage opponents’ nightmare scenario–the house/backyard cottage combo, with renters instead of homeowners in both units, is “pretty far-fetched,” O’Brien admits. And he says he’s heard from plenty of people who just don’t want renters next door. “I completely reject that perspective,” he says. “I’m not going to defend anyone who thinks this is going to be bad because there will be more renters living in a neighborhood.”

So if the nightmare scenario is implausible, and not really a nightmare to begin with, why capitulate? The way O’Brien describes it sounds an awful lot like he’s responding to a concern about problem that doesn’t exist and is unlikely to exist in the future, simply because so many neighbors have expressed that concern.

If that’s the case, O’Brien is surely aware that the Ballard and Phinney Ridge residents who show up at his office hours, write him furious emails, and complain about him on social media because they believe he’s in the pocket of developers won’t be swayed by this small concession. And preserving the owner-occupancy requirement could not only hurt homeowners who need the flexibility to move due to unexpected job changes or family obligations, but prospective renters already being priced out of Seattle by strict city zoning that “protects” most of the city from new housing supply.

You left out one major obstacle standing in the way of ADUs or DADUs: the off-street parking requirement. Many homeowners who would otherwise build one of these, or rent out an existing one, are dissuaded by the parking requirement.

ADU’s cost money to build, maintain, and will have additional expenses passed on to the renter. Landlords will rent ADU’s at market rates which are high, new units renting out for more than existing or older units (units = apts, duplexes, other ADU’s). This will just continue to raise the average rent for units in this town. This makes housing “affordable”? No renter will get a deal on a new ADU built to code, landlords will want to make a profit for their efforts. This will keep rents up. No need to even try the “more supply = lower rates” argument. Not even close to making a dent in keeping up with the demand.

Thanks Eric, Again, I don’t agree with your premise that an ADU will decrease the property value. If that were true why would anyone build an ADU other than out of sheer necessity? It seems reasonable to me to assume that an ADU is akin to a duplex. Many people purchase a duplex for the purpose of building equity while lowering the cost of ownership. I think an owner occupancy requirement (along with easing restrictions to ADU/DADU construction) increases ownership opportunities by increasing the amount of stock available. Lack of an occupancy requirement would do the opposite.

Right. We are a special snowflake. We are obviously completely different than Vancouver BC. They managed to dramatically increase density (doubling it in some cases). But that could never happen here. It has nothing to do with the differences in the law — it has everything to do with the fact that they talk funny up there (what’s up with that, eh?).

I have been, at various times, a renter, a homeowner and a landlord. The mentioned fear of tenant neighbors is not entirely “misguided”. Tenants may be as amicable or vexing a neighbor as the landlord chooses. It’s not an uncommon situation where the landlord’s only concern is receiving the rent each month.

I have a context question about this. At the HALA focus groups kick off, many of us were disappointed to hear just how hard the Mayor’s office was doubling down on “no changes to SF zones”. So by doing this, is O’Brien doing more backpedaling on the HALA grand bargain, or is he finding a way to at least get some DADU expansion in SF zones _back into_ the deal after Murray rashly took them all out?

My understanding was that Murray only took out the blanket permission to build duplexes and triplexes in single-family zones. The removal of the ADU owner-occupancy requirement was still in play the last I heard. I could be wrong though.

Regardless, I’ve heard a bunch of grumbling (on Nextdoor, etc.) about completely removing the owner-occupancy requirement. This new compromise seems like a reasonable way to *almost* remove this requirement while at the same time placating the folks who have an irrational fear of neighbors who don’t own their homes.

I agree that the fear of renters is misguided, to put it charitably. However this fear is real and lots of voters have it.

I think this one-year owner occupancy requirement is a reasonable compromise. The current requirement is that an owner live in one of the two units forever. If any current or future owner of that home is not able to live on site, they are literally required to rip out enough kitchen fixtures that the ADU no longer counts as a legal dwelling unit.

This requirement understandably makes homeowners think twice about building an ADU. When they go to sell their house in the future, the pool of potential buyers will be limited only to those people who are interested in being on-site landlords. This small buyer pool will likely reduce the amount they could ask for the home compared to if they were allowed to sell to someone who would rent out both units.

Reducing the owner-occupancy requirement to one year preserves the basic idea that accessory dwelling units are intended to be built and managed by individuals, while granting more flexibility for the owner to rent out both units in the future if circumstances warrant.

“This [owner occupancy] requirement understandably makes homeowners think twice about building an ADU. When they go to sell their house in the future, the pool of potential buyers will be limited only to those people who are interested in being on-site landlords. This small buyer pool will likely reduce the amount they could ask for the home compared to if they were allowed to sell to someone who would rent our both units.”

Eric, I’m not sure your premise is correct. Homeowners who desire to build an ADU and/or DADU are often seeking a source of income to allow them to buy or stay in a home they might not otherwise be able to afford. If owner occupancy results in a smaller buying pool when it comes time to sell (assume for the sake of argument this is true) the result will be lower cost. Lower cost will certainly not discourage a prospective home owner for whom the only path to acquiring a home and building equity is addition of an ADU and/or DADU. In any event, lower cost means more affordable housing for would be buyers. A good thing. By requiring owner occupancy this cycle can continue and will provide additional opportunities for entry level home ownership as well as increasing the amount of rental stock. Eliminating the owner occupancy requirement will promote the accretion of rental properties by individuals and entities. Stockpiling of rental properties would probably be to the detriment of renters and aspiring home owners.

“Homeowners who desire to build an ADU and/or DADU are often seeking a source of income to allow them to buy or stay in a home they might not otherwise be able to afford.”

I don’t disagree, but these folks are foolish if they don’t also consider the effect that an ADU will have on their property value. If they conclude that they won’t be able to get their construction cost back when they do eventually decide to sell because there aren’t many prospective homebuyers who would be willing to abide by the owner-occupancy requirement, they may not build the ADU at all.

As to your point that it may be a good thing to suppress prices of homes with ADUs so that more individuals with limited means can buy them later, that may sound nice, but it makes no difference if existing homeowners aren’t building ADUs in the first place.

Right now very few ADUs are being built at all. When the city asks existing homeowners why they don’t build one, the owner-occupancy requirement is a reason that comes up quite frequently.

Yeah, what Eric said. I happen to live next to someone who owns a house with a backyard cottage. The house took forever to sell. I forget the exact price, but it was something like $500,000 (for both). That is ridiculously low, even for this neighborhood (which is not exactly Wallingford). It is obvious that the owner didn’t get his money back, assuming it was built in the last five years (if sold separately — even as rentals — the main house would be worth around 400,000, and the small one 250,000). If you can’t get your money back in this market, then it really is a very poor incentive to build. Imagine someone making an addition to the house, knowing full well it won’t increase the value of the house. They might still make the addition, but they might not, especially if they might move in the next ten years. It also means that no one will buy a house and then add a unit, then sell it (or rent it out).

All of this means fewer of these will be built. Since fewer units are built, those that remain become less affordable. Buying that particular house is cheaper (only $500,000) but rents will remain higher than they would be otherwise.